Best Shipbuilding Stocks in India: From Shipyards to Stock Markets

In the midst of heavy fluctuations in the Sensex and the Nifty, shipbuilding stocks in India are reaching new highs day after day. Over the past year, shares of Cochin Shipyard have surged from ₹242 to an all-time high of ₹2,100, marking an astonishing 722% increase. Similarly, Mazagon Dock Shipbuilders saw their stock rise by ₹2,550 or 328%, reaching ₹3,478. Garden Reach Shipbuilders & Engineers (GRSE) also recorded significant gains, with their shares increasing by ₹950 or 205%, achieving a peak of ₹1,522 each.

A notable point is that these shipbuilding stocks belong to the Public Sector Undertaking (PSU) defence sector. Historically considered slow-growth stocks, PSUs have recently performed impressively, holding their own against private competitors. The Indian economy is transforming rapidly and is on track to become a $5 trillion economy in the coming years. This transformation is fueled by government initiatives and policies that have created numerous opportunities in the domestic market. Thus boosting the confidence of producers, entrepreneurs, and investors.

The government’s push for a self-reliant economy, particularly through initiatives like “Aatmanirbhar Bharat,” has significantly benefited Indian companies, including PSUs and defence sectors. This shift is evident from the remarkable growth in shipbuilding stocks in India. In this blog, we’ll explore the leading shipbuilding stocks that have shown significant performance in recent years and hold promising prospects for the future.

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Factors driving the growth in shipbuilding stocks in India

Robust Order Wins and Financial Performance– Shipbuilding stocks in India are rising due to strong order wins and improved financial performance. Companies have secured substantial contracts, driving their stock prices to new highs.

Defence Sector Opportunities– The Indian Navy and Coast Guard’s ambitious acquisition plans are promising for Indian shipbuilders. This demand ensures a continuous flow of high-value projects, benefiting the entire shipbuilding ecosystem.

Government Initiatives and Policies– Government initiatives like ‘Aatmanirbhar Bharat’ create a favourable environment for shipbuilding. Policies supporting indigenous manufacturing and procurement boost the prospects of Indian shipbuilders.

Increased Defence Exports– The government aims to increase defence exports to US$5 billion by 2024-25. This target underscores the sector’s growing significance. It also provides additional growth opportunities for the shipbuilding stocks in India.

Development of Coastal Shipping and Inland Waterways– Government emphasis on coastal shipping and inland waterways development benefits shipbuilders. Creating ship repair clusters will increase demand for new vessels and maintenance services.

Significant Capital Allocation for Navy– As per the Business Standard, the Indian Navy’s capital budget is projected at ₹4.5 trillion until 2027. This budget includes funding for submarines, destroyers, frigates, and aircraft carriers, benefiting the shipbuilding sector with long-term projects.

Strong Earnings Reports– Shipbuilding companies have reported strong earnings for the March quarter (Q4FY24), reflecting improved financial health and operational efficiency.

Ministry of Defence Projects– The Ministry of Defence has issued numerous Requests for Proposals (RFPs) over the past year for various shipbuilding projects. More RFPs are expected soon, boosting the industry and ensuring ongoing engagement and financial stability for Indian shipbuilders.

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Sectoral Trend- Indian Defence Sector Growth

The Indian defence sector is among the world’s largest and most profitable. As per the IBEF, it has a 10-year pipeline worth over US$ 223 billion and a projected medium-term investment of US$ 130 billion.

Defence Production and Export Promotion Policy (DPEPP)– Published in 2020, the DPEPP aims to increase defence turnover from RS. 80,000 crore (US$ 10 billion) in 2019-20 to RS. 1,75,000 crore (US$ 21.87 billion) by 2025. This includes RS 35,000 crore (US$ 4.37 billion) in exports.

Indigenised Defence Production– In March 2023, the Indian Navy received the indigenised fuze YDB-60 for underwater Rocket RGB 60. This was manufactured by private Indian industry for the first time, showcasing India’s growing self-reliance in defence production.

Fast Patrol Vessels Contract– In March 2023, a contract was signed with Goa Shipyard Limited for eight Fast Patrol Vessels (FPVs) for the Indian Coast Guard. The total cost is US$ 57.6 million (RS. 473.47 crore).

Modernisation of Naval Aircraft Yards– On March 31, 2023, the Ministry of Defence signed a contract with Ultra Dimensions Pvt. Ltd. (UDPL) for the modernisation of Naval Aircraft Yards (NAYs) in Goa and Kochi. This project, costing US$ 57.4 million (RS. 470 crore), will enhance the operational readiness of Naval Aviation Platforms. It will also reduce dependence on foreign Original Equipment Manufacturers (OEMs) for repairs. Thus supporting the ‘Aatmanirbhar Bharat’ initiative.

Best Shipbuilding Stocks in India

The best shipbuilding stocks in India benefiting from the growth trend are Mazagon Dock Shipbuilders Ltd, Cochin Shipyard Ltd, Garden Reach Shipbuilders & Engineers Ltd, VMS Industries Ltd, and Larsen & Toubro Shipbuilding Ltd.

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Let’s discuss a few facts about these shipbuilding stocks in India.

facts about the shipbuilding stocks in India.

Mazagon Dock Shipbuilders Ltd

52 Week High (30-May-2024) 3,478.00| 52 Week Low (01-Jun-2023) 797.50

Mazagon Dock Shipbuilders, based in Mumbai, primarily serves the Indian Navy and Coast Guard. As one of India’s leading Defence Public Sector Undertaking Shipyards, it operates under the Ministry of Defence (MoD). The company specializes in building and repairing ships, submarines, and various types of vessels. Additionally, it produces related engineering products. Since 1979, Mazagon Dock Shipbuilders could build warships, submarines, and merchant ships up to 40,000 DWT. 

Financial Performance:

Annual Financial Performance– Annual revenue increased by 24.13% to ₹10,568.05 crores. Annual net profit surged by 73.09% to ₹1,936.97 crores. The stock price soared by 298.13%, outperforming its sector by 148.45%.

Quarterly Financial Performance– Quarterly revenue rose 49.32% year-over-year (YoY) to ₹3,452.37 crores. Quarterly net profit jumped 103.25% YoY to ₹662.97 crores.

Read the full story Mazagon Dock Share: Navigating The Waves Of Success

Key Achievements and Recent Projects for Mazagon Dock Shipbuilders (MDL)

As of the third quarter of fiscal year 2024 (Q3FY24), the order book for Mazagon Dock Shipbuilders stands at approximately ₹38,390 crores. This substantial backlog of orders underscores the company’s strong market position and ongoing demand for its shipbuilding and repair services.

1. Fast Patrol Vessels (FPVs) for the Indian Coast Guard

-Date: January 24, 2024
-Contract Value: ₹1070.47 crore
-Details: Acquisition of 14 FPVs to be delivered over 63 months.

2. Multi-Purpose Hybrid Powered Vessels for European Client

-Date: December 14, 2023
-Contract Value: Approximately $42 million
-Details: Design, build, and deliver three 7,500 DWT hybrid powered vessels. First delivery in 27 months, with subsequent vessels at two-month intervals.

3. Next Generation Offshore Patrol Vessels (NGOPVs) for Indian Coast Guard

-Date: December 20, 2023
-Contract Value: ₹1600 crores
-Contract Details: Design, construction, and delivery of six NGOPVs. The first vessel to be delivered within 41 months from the advance payment, followed by five-month intervals for subsequent vessels.

Cochin Shipyard Ltd

52 Week High (27-May-2024) 2,100.00| 52 Week Low (31-May-2023) 244.23

Established in 1969, Cochin Shipyard Ltd. (CSL) is one of India’s premier shipbuilding and maintenance facilities. The company is renowned for constructing the INS Vikrant, India’s first Indigenous aircraft carrier, showcasing its capabilities in both commercial and defence sectors. CSL serves major domestic clients such as the Indian Navy, the Indian Coast Guard, and the Shipping Corporation of India Limited. Notably, CSL delivered the first indigenously built aircraft carrier, INS Vikrant, to the Indian Navy on July 28, 2022. The vessel was commissioned on September 2, 2022. 

The main yard at Kochi has undertaken significant repair projects for various vessels, including INS Deepak, INS Tir, INS Nireekshak, INS Sunayna and more.

Financial Performance:

Annual Financial Performance– In the past year, Cochin Shipyard Ltd. (CSL) saw a significant increase in financial performance. Annual revenue surged by 61.02%, reaching ₹4,140.64 crores. Similarly, annual net profit skyrocketed by 157.06%, totalling ₹783.28 crores. CSL’s stock price rose dramatically by 687.25%, outperforming its sector by 555.91% over the past year.

Quarterly Financial Performance– In the most recent quarter, CSL reported impressive growth. Quarterly revenue increased by 114.31% year-over-year (YoY), amounting to ₹1,366.17 crores. Additionally, quarterly net profit soared by 558.12% YoY, reaching ₹258.88 crores.

Key Achievements and Recent Projects for Cochin Shipyard Ltd

According to Crisil, Cochin Shipyard Ltd. (CSL) achieved sales of ₹1,488 crore in the first half of FY24. The company is projected to reach total sales of ₹3,200-3,400 crore for the full year. This sustained scale of operations is driven by capacity expansion, a robust order book, and timely execution.

1. Next Generation Missile Vessels (NGMV) for the Indian Navy

-Date: Recently signed
-Contract Value: ₹9,805 crore
-Details: Construction of six NGMVs, marking CSL’s entry into advanced weapon platforms. Delivery begins in March 2027.

2. Hybrid Service Operation Vessels (SOVs) for European Client

-Date: Recently signed
-Contract Value: ₹500-1000 crore
-Details: Build hybrid SOVs for the offshore wind industry, designed by VARD AS, Norway. Includes an option for one additional vessel.

3. Anti-submarine warfare (ASW) Corvettes for the Indian Navy

-Date: Recently signed
-Details: Construction of eight ASW Corvettes, enhancing CSL’s reputation as a leading provider of advanced vessels.

4. Eco Freighter 7000 DWT Vessels for HS Service GMBH & Co. KG, Germany

-Date: Recently signed
-Details: Build eight Eco Freighter 7000 DWT vessels, further expanding CSL’s international market presence.

These recent contracts and financial projections highlight CSL’s robust growth and expanding capabilities in both domestic and international markets.

Garden Reach Shipbuilders & Engineers Ltd

Based in Kolkata and founded in 1884, GRSE boasts a rich history in naval shipbuilding and repair. The company specializes in building and repairing various vessels, including warships, patrol vessels, and auxiliary ships. Utilizing modular construction technology, GRSE constructs up to 20 ships simultaneously. A robust team of multidisciplinary design engineers supports this capability by creating innovative designs for current and future warships.

The company has achieved over 90% Indigenous content in its Anti-Submarine Warfare Corvettes and Landing Craft Utility Ships, showcasing its commitment to self-reliance and innovation in the defence sector.

Financial Performance:

Annual Financial Performance– GRSE saw a substantial increase in financial metrics in the past year. Annual revenue surged by 40.87%, reaching ₹3,892.26 crore. Similarly, annual net profit increased by 56.61%, amounting to ₹357.27 crore. The stock price rose by 201.1%, outperforming its sector by 69.76%.

Quarterly Financial Performance– In the latest quarter, GRSE reported a significant rise in revenue and profit. Quarterly revenue grew by 68.96% year-over-year (YoY), reaching ₹1,091.65 crore. Similarly, quarterly net profit soared by 101.81% YoY, totalling ₹111.6 crore.

Key Achievements and Recent Projects for GRSE

1. Warship Building Projects for the Indian Navy and Coast Guard

-Date: Ongoing
-Contract Value: Approximately ₹25,000 crore
-Details: Executing three warship projects for the Indian Navy and one for the Indian Coast Guard. This includes the prestigious P17A project for three advanced frigates and two competitively won projects.

2. Export Orders for Patrol Boats and Ferry Vessel

-Date: Recently signed
Details:
-Government of Bangladesh: Order for six patrol boats.
-Republic of Guyana: Construction and supply of an ocean-going passenger cum cargo ferry vessel.

3. Portable Steel Bridges

-Date: Ongoing
-Details: Supplied over 5,300 portable steel bridges to the Indian Army, Border Road Organisation, state PWDs, and central governments. These bridges are primarily used for disaster management and have been exported to Bhutan, Nepal, Myanmar, and Sri Lanka.

4. Notable Infrastructure Installations

-Majherhat Bridge in Kolkata:
Time: Completed in a record six days.
-A bridge connecting VIP Road and Salt Lake:
Time: Completed in 12 days.

These projects and achievements underscore GRSE’s expertise and expanding capabilities in both domestic and international markets.

VMS Industries Ltd

The company, originally named Varun Management Services Pvt. Ltd., was incorporated in Bhavnagar on December 2, 1991. On May 22, 2007, the name was changed to VMS Industries Pvt. Ltd. to reflect its activities better. VMS Industries operates in two main segments: Ship Recycling Activities and Offshore Business Activities and Supporting Services

VMS Industries conducts ship recycling at Sosiya Ship Breaking Yard in Gujarat. The shipyards at Alang, located on the Gulf of Khambat, recycle approximately half of the world’s salvaged ships. These yards are situated about 50 kilometres southeast of Bhavnagar.

Financial Performance:

Annual Financial Performance– In the past year, VMS Industries Pvt. Ltd. saw a significant increase in its financial metrics. Annual revenue surged by 85.81%, reaching ₹270.84 crores. This strong performance was mirrored in the annual net profit, which soared by 152.86%, totalling ₹6.32 crores. The company’s stock price also performed remarkably well, rising by 156.56% and outperforming its sector by 25.22%.

Quarterly Financial Performance– In the latest quarter, VMS Industries reported impressive revenue growth. Quarterly revenue increased by 237.79% year-over-year (YoY), amounting to ₹93.47 crores. However, despite the strong revenue performance, quarterly net profit declined by 15.99% YoY, falling to ₹1.38 crores.

Larsen & Toubro Ltd

Larsen & Toubro Limited (L&T) is an Indian multinational company specializing in EPC projects, high-tech manufacturing, and services. The company operates in over 50 countries and is a major player in technology, engineering, construction, manufacturing, and financial services. L&T’s heavy engineering division includes two independent entities: the Heavy Engineering Independent Company and the Ship Building Independent Company. The company is known for constructing India’s first nuclear-powered submarine. It also provides comprehensive lifecycle management, mid-life upgrades, and in-service maintenance support for warships, submarines, and auxiliary vessels.

Further, L&T delivers end-to-end solutions for the Indian Navy and Coast Guard, covering everything from design and engineering to construction and maintenance. This ensures total support throughout the vessel’s lifecycle, enhancing operational efficiency and longevity.

Read the details of Larsen & Toubro Fundamental Analysis: Unlocking Value

Financial Performance:

Annual Financial Performance– In the fiscal year ending March 2024, Larsen & Toubro Ltd. (L&T) achieved a significant increase in its financial metrics. The annual revenue rose by 14.9%, reaching ₹131,576 crores. Similarly, the annual net profit saw an 18.5% increase, totalling ₹9,304 crores. Despite this robust performance, the stock price rose by 66.36%, slightly underperforming its sector by 3.14%.

Quarterly Financial Performance– In the latest quarter, L&T continued to show strong financial growth. The quarterly revenue increased by 14.99% year-over-year (YoY), amounting to ₹68,120.42 crores. Additionally, the quarterly net profit rose by 10.27% YoY, reaching ₹4,396.12 crores.

Summarising the Best Shipbuilding Stocks in India

Data as of 31st May 2024

Conclusion

Shipbuilding stocks in India, particularly the PSU defence companies, have demonstrated remarkable growth and resilience. Government policies and initiatives fostering a self-reliant economy have played a crucial role in this transformation. Cochin Shipyard Ltd., Mazagon Dock Shipbuilders Ltd., and Garden Reach Shipbuilders & Engineers Ltd. stand out as the top contenders in this space, each showing robust financial performance and strong prospects. Their strong order books and recent projects boost their potential for significant growth in the coming years. Furthermore, the ever-changing economic landscape of the Indian economy presents tremendous potential for shipbuilding stocks in India.

Disclaimer

The blog is meant for informational purposes and serves the general analysis of the stocks. The contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over some time. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfil their responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.